P ROJECT M ANAGEMENT

CCP_Section 5 Hisham Haridy, PMP, PMI-RMP, PMI-SP

Content

1. Project Management Fundamentals

2. Project Organization Structure
3. Project Communications
4. Project Labor Cost Control
5. Leadership and Management of Project People
6. Quality Management
7. Value Engineering
8. Contracting for Capital Projects
9. Strategic Asset Management
10. Change Management Practical Guide
11. Overview of Construction Claims and Disputes

PROJECT MANAGEMENT
PROJECT MANAGEMENT FUNDAMENTALS
The management of projects focuses on:
1. Identifying risks
2. Maximizing cost savings
3. Minimizing time delays
4. Improving economic return

These results can only be achieved through:

1. Effective management of people
2. Tough but fair project objectives
3. Efficient business techniques
4. Outstanding leadership skills

PROJECT MANAGEMENT
 PROJECT MANAGEMENT FUNDAMENTALS
Project
An item of work that requires planning, organizing, dedication of resources and expenditure
of funds in order to produce a concept, a product, or a plant.
It is a temporary endeavor with a definite starting point and ending point undertaken to
create a unique product or service

Project characteristic

Projects are temporary.
Has definite beginning and end, the end is reached when the project’s objective have
been achieved.

Projects are unique.
Every project creates a unique product, service, or results.

Progressively elaborated.
Progressively: proceeding in steps.
Elaborated: worked with care and detail.

PROJECT MANAGEMENT
PROJECT MANAGEMENT FUNDAMENTALS

Project Objectives

Something toward which work is to be directed, a strategic position to be attained,

or a purpose to be achieved, a result to be obtained, a product to be produced, or a

service to be performed.

Each project must have at LEAST one objective.

The objectives of the project MUST be made known and communicated.

Project objective MUST follow the SMART rule;

 S = specific
 M = measurable
 A = attainable
 R = realistic or relevant
 T = time bound

PROJECT MANAGEMENT
PROJECT MANAGEMENT FUNDAMENTALS

Project Management Function

Cost Management

Time Management

Human Resources

Communications
“Poor administrative practices” barriers
are common to all companies and are
generally referred to as Matrix
Interface Conflicts (MICs)

Major Factors That Are Essential for the Successful Execution of Projects
PROJECT MANAGEMENT
PROJECT MANAGEMENT FUNDAMENTALS
Project Phases
Most of these phases will overlap, and the degree of overlapping will depend on the work
content of each phase and the efficiency of decision making present in the project.

Development
1 planning
Feasibility
2
study
Conceptual
3 study

4 Project
planning

5 Basic design

Detail design and

6 procurement

7 Construction

Commission
8 and start-up

PROJECT MANAGEMENT
 PROJECT MANAGEMENT FUNDAMENTALS

Project Life Cycle

Engineering
Request

Solve Problems Project

Upgrade Quality Development
Addition Quantity Technical budgeting and
Project Conditions
Management
Environmental
Stay In Business Regulatory Phases
Project
Conceptual Cost estimate Funding Execution
Economics Estimate Quality
Small
Execution Strategy
Large
Project Resources

PROJECT MANAGEMENT
PROJECT MANAGEMENT FUNDAMENTALS

Projects are designed and built by people, not companies. People do it singly, or in
multiple groups; and if there are skilled people and good relationships, there is a
chance of success.

If the people and relationships are poor, there is little chance of success.

Greater personnel efficiency and increased
operational quality are essential
requirements in today's difficult business
environment.

The “Bean Counter” Syndrome is a wide

spread practice, where effective cost control
is absent or greatly diminished.

It is a dangerous and unacceptable
practice.

PROJECT MANAGEMENT
PROJECT ORGANIZATION STRUCTURE

Projects are impacted by, and have impact on, the cultural norms, management
policies, and procedures of the organizations of which they are a part.

The best project managers look for these influences and manage them for the
benefit of the project and the organization.

One of the main forms of influence is how the company is organized.

Project organizations can be as strong as the processes that have been put in place,
but in the end―success is measured by the quality of the leadership and the
members of the project team

Organizational structures can be defined in terms of the project manager's level
of authority.

Types of organizations
 Functional organizations
 Matrix organizations

PROJECT MANAGEMENT
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PROJECT MANAGEMENT
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Matrix
PROJECT MANAGEMENT
PROJECT ORGANIZATION STRUCTURE
Matrix Organization

Effective information exchange and efficient coordination of project workload.

More efficiently use resources.

Clearly defined project execution plan (accept, commit to, and work to the agreed
execution plan)

Project manager having inadequate authority.

Individual who is doing the work reports to two bosses.

Conflict management.

It needs strong project management culture and effective company leadership.

The “matrix” failed

SO,

The solution was a new approach called Quality Management that was
introduced by Dr. Edward Deming.

PROJECT MANAGEMENT
PROJECT ORGANIZATION STRUCTURE

Project Organization structures have become dynamic as a result of the numerous

international perspectives that have been applied.

The successful companies embrace a quality of empowerment and reward,

which allows them to maximize the organizational programs.

Many of these new organizational changes come from the Demingism programs

which developed the Total Quality Management (TQM) philosophy.

Term “Demingism” coined after Dr. Edward Deming’s approach to TQM in the

1960s and 1970s

PROJECT MANAGEMENT
PROJECT ORGANIZATION STRUCTURE
Demingism and Total Quality Management (TQM)

Criteria for Developing a Quality Management Program ( 6 components of total

quality management)

1. Client satisfaction

2. Understanding and reducing variation

3. “Top-down” management leadership and commitment

4. Continuous change and improvement

5. Ongoing training and education

6. A culture of personnel pride and job satisfaction

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PROJECT ORGANIZATION STRUCTURE
Use of TQM for Effective Project Delivery
1. Owner qualification to perform as project manager
2. Organization structure alignment with contracting arrangements
3. Project manager qualification
4. Determine if project manager reports to the client or to projects/engineering
5. Use of project task force (PTF) “Used on larger projects, more efficient communication channels,
challenge of brining individuals from many parts of a company is a substantial task, use of a business
manager”

6. Correct emphasis on business management

7. Efficient and effective project team
8. Project organization structure
9. Use of project organization charts
10. Establish authority of the project manager
11. Define project controls reporting relationship

PROJECT MANAGEMENT
PROJECT ORGANIZATION STRUCTURE

Project Manager Key Qualification and Authority

AUTHORITY
QULIFICATIONS
Full authority to
Technical
make both design
expertise, project and cost decisions,
experience, with appropriate
business capability, limits of authority
leadership ability, and management
reporting
and people skills.
requirements

PROJECT MANAGEMENT
PROJECT COMMUNICATION
Communication

Communication has been identified as one of the single biggest reasons for project
success or failure.

Openness in communication is a gateway to teamwork and high performance.

It improves relationships among project team members and creates mutual trust.

A formal and informal structure of effective communication is absolutely essential for

successful project execution.

Many company organizations and cultures have poor administrative practices that
also form barriers to project success.

These barriers are common to all companies and are generally referred to as Matrix
Interface Conflicts (MICs).

The total quality management programs sweeping the industry are an attempt to
solve these problems.

PROJECT MANAGEMENT
PROJECT COMMUNICATION
Communication Model

Communication involves the exchange of information:
 The sender is responsible of making the information clear unambiguous and
complete, to receiver.
 The receiver has to ensure that the information received in understood and
correctly understood.

PROJECT MANAGEMENT
 PROJECT COMMUNICATION
Body Language and Personality Types

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PROJECT COMMUNICATION
Nonverbal Communications

Four key principles:
1. Context is important
2. Observe behavior holistically
3. Watch for changes in body language
4. Watch for congruence (body language and words match)

Positive nonverbal clues

1. Uncrossed arms/legs
2. Open hands
3. Rubbing the chin
4. Moving closer
5. Eye contact
6. Matching (movements of speaker/listener)

Negative nonverbal clues
1. Crossed arms/legs
2. Clenched or hidden hands
3. Moving away

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 PROJECT COMMUNICATION
Effective Listening

The receiver should decode the message carefully and confirm the message is
understood.

This includes watching the speaker to pick up physical gestures and facial
expressions, thinking about what to say before responding, and using active
listening, in which the receiver confirms he or she is listening, expresses
agreement or disagreement, or asks for clarification.

Listening is an important part of
communication.

Listening techniques, both active and
effective give the user insight to problem
areas, negotiation and conflict management
strategies, decision making, and problem
resolution.

PROJECT MANAGEMENT
PROJECT COMMUNICATION
Elements of LISTEN
1. Look interested and give the speaker your undivided attention.
2. Involve yourself by responding to show you are listening.
3. Stay on target.
4. Test your understanding of what is being stated.
5. Evaluate the message and respond appropriately.
6. Neutralize your feelings
Improving Listening
1. Don’t Interrupt
2. Put the Speaker at Ease
3. Appear Interested
4. Cut Out Distractions
5. Periodically Sum Up What Was Said

PROJECT MANAGEMENT
PROJECT COMMUNICATION
Top 5 communication barriers
1. Lack of common language
2. Use of slang and terminology
3. Loss of nonverbal communication clues
4. Lack of team interaction
5. Use of information filters

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 PROJECT COMMUNICATION
Communication Dimensions

Internal (within the project) and external (customer, other projects, the media,

the public).

Formal (reports, memos, briefings) and informal (emails, ad-hoc discussions).

Vertical (up and down the organization) and horizontal (with peers).

Official (newsletters, annual report) and unofficial (off the record

communications).

Written and oral.

Verbal and non-verbal (voice inflections, body language).

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 PROJECT COMMUNICATION
Communication Forms

Forms Characteristics Example

Written
Precise  Project Charter, Scope Statement, Project
Formal
Transmitted through Plan, WBS, project status.
the medium of  Complex issues
correspondence  Contract related communication

Written  Email, Notes, Memos, Letters

Informal  Regular communication with team members

Oral Formal
High Degree of  Presentations, speeches.

Flexibility  Negotiations, conflict resolution

Oral Informal
Use the medium of  Conversation with team members

personal contact, group  Project Meetings
meetings or telephone  Break-room or war-room conversations

Non-verbal
55% of total  Facial expressions, hand movements, tone of

communication voice while speaking etc.

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PROJECT COMMUNICATION
Written Communications

Email is now the most common form of written communication

Best practices when writing and managing email:

1. Consider your audience before writing the email.

2. Use the subject line to describe email contents.

3. Keep email short, concise, and coherent.

4. Do not type in all UPPER case or all lower case.

5. Proofread your document before sending (grammar and spell check).

6. Do not attach files unnecessarily.

7. Be aware that email is not confidential.

8. Do not send emails when you are angry.

PROJECT MANAGEMENT
PROJECT COMMUNICATION

Use of Technology for Business Purposes

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PROJECT COMMUNICATION
Identify Stakeholders

A key first step for effective communications is identifying the stakeholders you
need to communicate with on the project.

Stakeholders are those people who are directly or indirectly affected by the project or
who can affect the project.

Stakeholders can view the project as positive or negative, and can be either internal or
external to the organization.

There are multiple classification models
available such as;

i. Power/interest grid
ii. Power/influence grid.
iii.Influence/impact grid.

PROJECT MANAGEMENT
PROJECT COMMUNICATION
Team Charter

An agreement on operating guidelines and group behavior norms for the team

Covers more than communications
 Team member roles/responsibilities
 Administrative procedures
 Reporting hours worked
 Team performance measures
 Decision-making process
 Ground rules for team conduct
 Dealing with issues and conflict
 Meeting commitments
 Returning telephone calls and emails

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PROJECT COMMUNICATION
Virtual teams

Virtual teams have become much more popular over recent years.

A virtual team is a group of geographically dispersed individuals who work across
space and organizational boundaries to complete projects.

Instead, they typically use communication tools to meet online, share
information, and collaborate on deliverables.

Achieving better virtual team communications:
1. Connect with all team members
2. Prepare e-communication plan
3. Use effective communication tools

More than 66% of business professionals

engage in virtual work, and that number is
rapidly growing

PROJECT MANAGEMENT
PROJECT LABOR COST CONTROL

Labor costs is a variable element of a construction project.

The 3 components of labor costs
1. Quantities installed
2. Production rates
3. Wage rates

The two prevalent construction labor cost control reporting systems are:
1. The Earned Value Method
2. The Unit Rates Method

Labor cost control is best achieved by using a feedback loop.

Cost control should be approached as an application of Pareto’s Law.
80 % of the outcome of a project is determined by
only 20 % of the included elements.

PROJECT MANAGEMENT
PROJECT LABOR COST CONTROL

Factors affecting construction craft productivity include the following:
 Crew sizes and craft composition
 Craft density (area per worker)
 Interference with other crews
 Scheduling
 Material availability
 Equipment and tool availability
 Information availability
 Rework as a result of design, fabrication, and field errors
 Site layout
 Weather
 Constructability

PROJECT MANAGEMENT
 PROJECT LABOR COST CONTROL
Measuring Inputs & Outputs

(Input) Workhours expended or Labor dollars

Labor cost efficiencies =
(Output) Quantities produced

Input Output

 Workhours are measured directly  Quantity cannot be measured with a

using cost codes and time cards. common unit of measure.
 Labor Dollars= workhour  The output cannot be measured with a
expended X the wage rate common unit of measure.
 Examples m3 of excavation, m2 of
formwork, tons of steel, lineal meters of
pipe, ... etc.

 Cost control requires matching each unit of output to the input (resources) that was
required to produce it.

PROJECT MANAGEMENT
 PROJECT LABOR COST CONTROL
Earned Value Method

The earned value method can be compared to the value of work scheduled as part
of an integrated project control system
Acronym Terms Formula
%
% Complete (single account) = Actual Qty / Forecasted Total Quantity
Complete
BCWP Earned Value = Actual % Complete X Budget for the account
%
% Complete (multiple accounts) = EV (all accounts) / Budget value (all accounts)
Complete
= Scheduled % Complete X Budget dollars or Workhours
BCWS Schedule Value
= Qty scheduled X Budget unit cost or production rate

CV Cost Variance = Earned value - Actual cost

CPI Cost Performance Index = Earned value / Actual cost

SV Schedule Variance = Earned value – Schedule Value

SPI Schedule Performance Index = Earned value / Schedule Value

PROJECT MANAGEMENT
PROJECT LABOR COST CONTROL

Work from this point forward will

= Actual cost to-date + (Budget - EV)
progress at the budget (CPI = 1)
EAC

The performance to-date will continue = Budget / CPI

Uses historical curves that show the normal variation in the CPI as the cost account
progresses

What the cost would have been if the actual quantities were installed at the budget
unit rate? Credit Value (Dollars or Workhours)

Terms Formula
Credit Dollars (C$) = Actual Quantity x Budget Unit Cost
Credit Workhours (CWH) = Actual Quantity x x Budget production rate
Unit Cost Index (UCI) = Credit Dollars / Actual Dollars
Productivity Index (PI) = Credit Workhours / Actual Workhours

PROJECT MANAGEMENT
 PROJECT LABOR COST CONTROL
Unit Rates Method

The advantage of the unit rates method is that the unit costs and production rates
are used for estimating and are therefore familiar to most managers.

Work from this point forward will progress at budget = Actual dollars or workhours to-date
unit rates + [To go qty X Budget unit rate]
EAC

The unit rate prevailing to-date will continue to prevail = Total qty X Actual unit rate

Uses historical curves that show the normal variation in unit rates as the cost account progresses

A frequent question is what or who is responsible for the total difference between the
budget and the EAC? Two way variance analysis is one method for answering this
question.

Two way variance analysis

1. Quantity variance
2. Rate variance

PROJECT MANAGEMENT
PROJECT LABOR COST CONTROL

Quantity Variance = CQ x PB
Where:
CQ Change in Quantity = QB – QF
QF Forecast Quantity
QB Budget Quantity
PB Budget Production Rate or Unit Cost

Unit Rate Variance (Production Rate or Unit Cost) = QF x CP

Where:
CP Change in Production Rate or Unit Cost = PB – PF
PF Forecast Production Rate or Unit Cost
PB Budget Production Rate or Unit Cost
QF Forecast Quantity

Estimated Total at Completion (EAC) = QF x PF

Budget = QB x PB

 The project manager concentrates corrective efforts on those activities whose actual
performance deviate from the budget.
 The effectiveness of the corrective action is monitored by the feedback loop.
PROJECT MANAGEMENT
PROJECT LABOR COST CONTROL
Example

Total Budget Duration Elapsed Duration

$1,440 20 days 5 days

Budget quantity Forecasted quantity Actual quantity Actual cost

2880 2880 608 $288

Acronym Terms Formula

BCWP Earned Value =(608/2880) x $1,440 = $304
BCWS Schedule Value = (5/20) x $1,440 = $360
C$ Credit Dollars = 608 x (1440 / 2880) = $304

CV Cost Variance = 304 – 288 = 16

CPI Cost Performance Index = 304 / 288 = 1.056
SV Schedule Variance = 304 – 360 = - 56
SPI Schedule Performance Index = 304 / 360 = 0.84
EAC Estimated at Completion = 1,440 / 1.056 = $1,364
VAC Variance at Completion = 1,440 – 1364 = 76

PROJECT MANAGEMENT
 PROJECT LABOR COST CONTROL
Unit Rates Method

PB Budget Unit Rate = $1,440 / 2880 = 0.5 $/L.F

PF Cost Performance Index = $288 / 608 = 0.4737 $/L.F

EAC Estimated at Completion = 2880 x 0.4737 = $1,364

CQ Change in Quantity = QB– QF = 2880 – 2800 = 0

Change in Production Rate or

CP = 0.5 – 0.4737 = 0.0263
Unit Cost = PB – PF

VAC Variance at Completion = (0.00 x 0.5) + (0.0263 x 2880) = 76

PROJECT MANAGEMENT
LEADERSHIP AND MANAGEMENT OF PROJECT PEOPLE

The project manager must be able to lead, motivate and persuade people to act in
the best interest of the project and must be able to build a team and lead
members to give their best effort to the project.

Effective project managers acquire a balance of technical, interpersonal, and
conceptual skills that help them analyze situations and interact appropriately
 Leadership
 Team building
 Motivation
 Communication
 Influencing
 Decision making
 Political and cultural awareness
 Negotiation

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LEADERSHIP AND MANAGEMENT OF PROJECT PEOPLE
Leadership

Leadership involves focusing the efforts of a group of people toward a common
goal and enabling them to work as a team.

Leadership is the ability to get things done through others.

Respect and trust, rather than fear and submission, are the key elements of
effective leadership.

Although important throughout

Effective leadership is critical during the beginning phases of a project when the
emphasis is on communicating the vision and motivating and inspiring project
participants to achieve high performance.

Throughout the project, the project team leaders are responsible for establishing
and maintaining the vision, strategy, and communications; fostering trust and team
building; influencing, mentoring, and monitoring; and evaluating the performance
of the team and the project.

PROJECT MANAGEMENT
LEADERSHIP AND MANAGEMENT OF PROJECT PEOPLE
Leadership styles concepts

1. Theory of X and Y (Douglas McGregor’s)

Theory “X” Theory “Y”
 People inherently dislike work.  People view work as being as natural as play
 People must be coerced or controlled to do and rest .
work to achieve objectives.  People will exercise self-direction and control
 People prefer to be directed basic human towards achieving objectives they are
needs are arranged in a hierarchy. committed to.
 People learn to accept and seek responsibility.

PROJECT MANAGEMENT
 LEADERSHIP AND MANAGEMENT OF PROJECT PEOPLE

People are self-motivated and will exercise self-direction and self-control toward
achieving objectives to which they are committed

PROJECT MANAGEMENT
LEADERSHIP AND MANAGEMENT OF PROJECT PEOPLE

2. Hygiene / Two Factors Theory (Frederick Herzberg’s).

Hygiene factors: A series of hygiene factors create dissatisfaction if individuals
perceive them as inadequate or inequitable.

Motivators: It is
intrinsic factors that
determine satisfaction.

PROJECT MANAGEMENT
LEADERSHIP AND MANAGEMENT OF PROJECT PEOPLE
3. Organization and Human Problem (Chris Argyris)

Advanced some of McGregor’s theories.

Organization may be the source and cause of human problems.

Individual needs and organizational needs were not met effectively in most

organizations.

Part of the problem was due to bureaucratic and hierarchical structures.

Solution

1. Ad hoc work groups, or project teams.

2. Challenges and opportunities for responsibilities.

3. Open communication and trust are needed.

PROJECT MANAGEMENT
LEADERSHIP AND MANAGEMENT OF PROJECT PEOPLE
4. LIKERT’S 4 systems of Management (Rensis Likert)

The development of an attitude measurement approach known as the Likert -

type scale.

Developed the concept of the linking pin “a person who belongs to two
groups in the organization”.

Four basic styles of leadership
1. Exploitive – Authoritative
2. Benevolent – Authoritative
3. Consultative
4. Participative Group
 Ideal for a human-concerned organization.
 Trust between employees and management.
 Widely delegated decision – making.

PROJECT MANAGEMENT
LEADERSHIP AND MANAGEMENT OF PROJECT PEOPLE
5. Managerial/Leadership Grid Theory (Drs. Robert Blake and Jane
Mouton)

open-
minded,
flexible and
one who
inspires
involvement

doing just enough

to keep their job

PROJECT MANAGEMENT
LEADERSHIP AND MANAGEMENT OF PROJECT PEOPLE
Team building

The process of helping a group of individuals, bound by a common sense of
purpose, to work interdependently with each other, the leader, external
stakeholders, and the organization.

Good leadership + Good team building = Teamwork.

Team building activities consist of tasks

(establish goals, define, and negotiate
roles and procedures) and processes
(interpersonal behavior with emphasis
on communication, conflict
management, motivation, and
leadership).

PROJECT MANAGEMENT
LEADERSHIP AND MANAGEMENT OF PROJECT PEOPLE

PROJECT MANAGEMENT
LEADERSHIP AND MANAGEMENT OF PROJECT PEOPLE
Cross-Cultural Concerns

By understanding the cultural differences, the project management team is more
likely to create an environment of mutual trust.

Cultural differences can be both individual and corporate in nature and may
involve both internal and external stakeholders.

An effective way to manage this cultural diversity is through getting to know the
various team members and the use of good communication planning.

Culture can impact the speed of working and the decision-making process.

This may lead to conflict and stress in

some organizations, thereby affecting the
performance of project managers and
project teams.

PROJECT MANAGEMENT
LEADERSHIP AND MANAGEMENT OF PROJECT PEOPLE
Leading, Managing, Facilitating, And Mentoring

Leadership
 Ability to conceptualize the vision, direct the project, and communicate or sell this
vision to the team members and other stakeholders.
 Encouraged to ask questions about project purpose and to offer opinions.
 Gain credibility and must demonstrate managerial actions and behaviours.
 Being the team’s voice to the outside world.
 Communicate actively to address stakeholders in terms of supporting and buying
into the project goals.

Management
 Manager role ensures the project is completed on time, within budget, and at
acceptable levels of performance.
 Create the administrative procedures and structure to complete the project

PROJECT MANAGEMENT
LEADERSHIP AND MANAGEMENT OF PROJECT PEOPLE

Facilitation
 Help others get their work done.
 It involves communication, conflict resolution, procure necessary resources,
motivate both individual team members and the team as a unit.
 The goal is to provide team members with choices, options, and then trust that
the team members will create the desired outcome.

Mentor or Coach
 Being a role model who demonstrates desired skills, behaviour, and attitudes.
 Demonstrating personal interest in professional growth of team members.
 Think-out-loud with team (suggestions, possibilities, problem solving
approaches)
 Assisting team members in identifying and achieving long-term professional
goals.

PROJECT MANAGEMENT
LEADERSHIP AND MANAGEMENT OF PROJECT PEOPLE
Effective Project Manager

Leader Facilitator

Manager Mentor

PROJECT MANAGEMENT
LEADERSHIP AND MANAGEMENT OF PROJECT PEOPLE
Motivation

Project teams are comprised of team members with diverse backgrounds,
expectations, and individual objectives.

Motivating in a project environment involves creating an environment to meet
project objectives while offering maximum self-satisfaction related to what
people value most.

These values may include

 Job satisfaction
 Challenging work
 Sense of accomplishment
 Achievement and growth
 Sufficient financial compensation
 Other rewards and recognition the individual
considers necessary and important.

PROJECT MANAGEMENT
LEADERSHIP AND MANAGEMENT OF PROJECT PEOPLE
Motivation Theories
1. Biological Perspective

Actions contribute in preservation and expansion of
the species will produce motivation.

It is appropriate when confined to the more basic
aspects of human behaviour, such as hunger and
thirst, reproduction.
2. Drive Theories

Certain behaviors are the result of individuals meeting the requirements of

specific drives.

The goal of reducing tension is to achieve an
internal state of equilibrium or balance.

Motivation by attempts to maintain this balance.

Similar to evolutionary.

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 LEADERSHIP AND MANAGEMENT OF PROJECT PEOPLE
3. Incentive Theories

Individual behavior is pulled in certain directions based on the external conditions
in the specific setting

It can work when the manager and team member have the ability and the
resources to identify a desired behaviour that can be awarded.

The incentives must be valued by the group.

The incentives need to be appropriate to the culture of the organization.

3. Theory Of Needs - Acquired Needs Theory (David McClelland)

People who value the need for achievement
are often those people who are the leaders
in the areas of creativity and economic
growth.

The need to achieve within one’s discipline
can self-motivate many individuals.

PROJECT MANAGEMENT
 LEADERSHIP AND MANAGEMENT OF PROJECT PEOPLE
5. Fear Of Failure

A strong motivator in situations when the consequences for failure are
especially catastrophic.

It should be employed only in unusual circumstances
6. Maslow’s Hierarchy of Needs Theory (Abraham Maslow)

The basic human needs are arranged

in a hierarchy.

The lower needs must be satisfied
before the higher needs can be
addressed.

According to this concept, people are
always in some sort of a ‘‘needs’’
state.

PROJECT MANAGEMENT
LEADERSHIP AND MANAGEMENT OF PROJECT PEOPLE
7. Career Theory (E. Schein )

A different approach through a model that describes major stages in a personal
career.

An understanding of an individual’s current career stage by the leader can be used in
developing tangible approaches to individual motivation. This model has ten career
stages.
 Stage 1&2: life before entering the world of work
 Stage 3: The first formal entry into the workplace
 Stage 4: Training in the concrete application of skills and professional socialization
 Stage 5:The individual is observed as having gained full admission into the profession
 Stage 6: The individual gains a more permanent membership in the profession.
 Stage 7: The natural mid-career assessment or crisis
 Stage 8:The career starts to move into its final chapters.
 Stage 9: Beginning to disengage from the world of work.
 Stage 10: The retirement stage

PROJECT MANAGEMENT
LEADERSHIP AND MANAGEMENT OF PROJECT PEOPLE
8. Empowerment Theory - J.R. Meredith and S.J. Mantel

A team environment be established in which the members experience a strong sense
of empowerment through the use of participatory management methods.

Empowerment is defined as an approach that stresses individual initiative,
solution creation, and accountability.

The team is then motivated by the opportunity to be self-determinative in creating
the structure and methods to achieve its goals.
9. Ethical Theories and Applications

Ethics is an emotionally and intellectually charged word for any professional.

It is science of judging specifically human ends and the relationship of means to
those ends.

It prompts images of moral responsibility and obligation, scholars debating the
intricacies of profound issues, and arguments between professionals and social
commentators about right and wrong behavior.

PROJECT MANAGEMENT
QUALITY MANAGEMENT

Total Quality

Quality Management

Assurance
Quality
Involvement Continuous
Control
Improvement
Inspection Compliance to
specification
Allocating blame

PROJECT MANAGEMENT
QUALITY MANAGEMENT

People Materials Environment

Equipment Method

PROJECT MANAGEMENT
QUALITY MANAGEMENT

What is Quality? ”‫“إن  يحب إذا عمل أحدكم عمال أن يتقنه‬

Conformance to established requirements

OR the degree to which the project fulfills the requirements

Quality Grade

The combination of all of an entity’s A category or rank given to entities

characteristics that enable the having the same functional use but
satisfaction of stated or implied needs. different technical characteristics.

Low quality is always a problem Low grade may NOT be a problem

Quality MUST BE planned in NOT inspected in

PROJECT MANAGEMENT
QUALITY MANAGEMENT
Standard and Regulation

Standard Regulation

A document established by consensus

Is a government imposed
and approved by a recognized body
requirement, which specifies product,
that provides, for common and repeated
process or service characteristics,
use, rules, guidelines or characteristics
including the applicable administrative
for activities or their results, aimed at
provision, with which compliance is
achievement of the optimum degree of
mandatory.
order in a given context

Example: the size of a computer disk

Example: Building codes
and the ISO standards.

PROJECT MANAGEMENT
QUALITY MANAGEMENT
Juran’s Trilogy

(PDCA) Cycle
W. Edwards Deming, advocated a similar and now well-
accepted set of steps with his “Plan-Do-Check-Act”

PROJECT MANAGEMENT
QUALITY MANAGEMENT
Categorizing quality costs
1. Error-free costs
2. Cost of Quality (COQ)
1. Costs of conformance
1. Prevention
2. Appraisal
2. Costs of non-conformance
1. Internal failure
2. External failure
3. Hidden poor quality costs
1. Postponed profits
2. Lost profits
3. Customer incurred costs
4. Socio-economic costs

PROJECT MANAGEMENT
QUALITY MANAGEMENT
Cost of Quality

Cost of Conformance Cost of Nonconformance

Prevention Cost (Build a quality
product) and Appraisal Cost (Assess Failure Cost.
the quality).

Prevention Appraisal Internal Scrap.

(pre customer)
Planning. Testing. Rework.
“Fixes prior to
Training. Destructive delivery” Inventory cost.

Auditing. testing loss. Warranty.

Inspections. External
Controlling. Service.
(post customer)
Recalls.
Money spent during the project Money spent during and after
to avoid failures. the project because of failures.

PROJECT MANAGEMENT
QUALITY MANAGEMENT
Cost of Quality before and after TQM

Before TQM After TQM

PROJECT MANAGEMENT
QUALITY MANAGEMENT

PROJECT MANAGEMENT
QUALITY MANAGEMENT
Value

This is a major challenge for executives, and it involves increasing value.

Value is an ambiguous term and can be highly subjective.

A primary responsibility for executives is to create value for the customer while
increasing economic wealth for employees and shareholders—all at the same time!

Performance
Value =
Cost

With this math, value increases if the numerator goes up or the denominator goes
down.

Quality management is an essential element for

managing costs.

PROJECT MANAGEMENT
QUALITY MANAGEMENT
Quality Evolution
1940s and 1950 1960s and 1970

PROJECT MANAGEMENT
QUALITY MANAGEMENT

National Standards Institute (ANSI) represents the United States. ISO 9000 is not a
set of standards for products or services, nor is it specific to any one industry.
Instead, it is a quality system standard applicable to any product, service, or
process anywhere in the world.

The information included in the ISO 9000 series includes:

 ISO 9000: This defines the key terms and acts as a road map for the other standards
within the series.
 ISO 9001: This defines the model for a quality system when a contractor demonstrates the
capability to design, produce, and install products or services.
 ISO 9002: This is a quality system model for quality assurance in production and
installation.
 ISO 9003: This is a quality system model for quality assurance in final inspection and
testing.
 ISO 9004: This provides quality management guidelines for any organization wishing to
develop and implement a quality system. Guidelines are also available to determine the
extent to which each quality system model is applicable.
PROJECT MANAGEMENT
QUALITY MANAGEMENT

1 2 3 4 5 6

Becoming
Getting prevention
Everyone
Writing a Defining Following everyone oriented
wants to
policy Procedures them else to follow continuously
follow them
them improving
organization

TOTAL QUALITY MANAGEMENT

ISO 9000

PROJECT MANAGEMENT
QUALITY MANAGEMENT

Principles of TQM

Customer-oriented

Leadership

Strategic planning

Employee responsibility

Continuous improvement

Cooperation

Statistical methods

Training and education

PROJECT MANAGEMENT
 QUALITY MANAGEMENT
W. Edwards Deming “Quality is a management problem”
The 14 Points “standard reference for quality transformation”
1. Create a constant purpose toward improvement.
2. Adopt the new philosophy.
3. Stop depending on inspections.
4. Use a single supplier for any one item.
5. Improve constantly and forever.
 Continuously improve your systems and processes. Deming promoted the Plan-Do-
Check-Act approach to process analysis and improvement.
 Emphasize training and education so everyone can do their jobs better.
 Use kaizen as a model to reduce waste and to improve productivity, effectiveness, and Oct.1900 – Dec. 1993
safety.
By improving
6. Use training on the job.
quality, companies
7. Implement leadership.
will decrease
8. Eliminate fear.
expenses as well as
9. Break down barriers between departments.
increase
10.Get rid of unclear slogans.
productivity and
11.Eliminate management by objectives.
market share.
12.Remove barriers to pride of workmanship.
13.Implement education and self-improvement. “Out of Crisis”
14.Make "transformation" everyone's job. 1982
Quality problem (85% management and 15% worker)
PROJECT MANAGEMENT
 QUALITY MANAGEMENT

Dr. Joseph M. Juran (The Father of Quality) “Fitness for Use”

Quality begins with who, how, and why these customers will use it, without
this information any improvement will be guesswork.
In other words, all improvement activities should be customer focused
Juran’s five attributes for “fitness for use”:
1. Quality of design
2. Quality of conformance (Dec. 1904 – Feb. 2008)

3. Availability Needs of the

customers and
4. Safety Stakeholders are
5. Field use defined and then
attempted to
He development 80/20 principle
satisfy.
Quality is fitness for use.
1Quality Control Handbook, 2Managerial Breakthrough, 3Management of Quality “Quality Control
Control, 4Quality Planning and Analysis, 5Upper Management and Quality, and Handbook 1951”
6Juran on Planning for Quality.

PROJECT MANAGEMENT
 QUALITY MANAGEMENT

Philip Crosby “Zero defects and prevention or rework results ”

Zero defects is a way of thinking and doing that reinforces the notion
that defects are not acceptable, and that everyone should "do things
right the first time".

The idea here is that with a philosophy of zero defects, you can
increase profits both by eliminating the cost of failure and increasing
Jun.1926 - Aug. 2001
revenues through increased customer satisfaction.
Defects are not

Zero defects is NOT about being perfect. Zero defects is about
acceptable, and
changing your perspective. It does this by demanding that you: that everyone
1. Recognize the high cost of quality issues. should "do
things right the
2. Continuously think of the places where flaws may be introduced. first time“
3. Work proactively to address the flaws in your systems and
“Quality is free
processes, which allow defects to occur. 1979”
Quality is conformance to requirements.

PROJECT MANAGEMENT
 QUALITY MANAGEMENT

Kaizen Philosophy “Continuous Improvement”

Apply continuous small improvements to reduce costs and ensure consistency.
Kaizen (Ky’zen) is meaning “change for the better” in Japanese.
改

In united Stated and most of Western Europe, improvements are thought of as big improvements.
In Japan, improvements are thought of as small improvements.
PROJECT MANAGEMENT
VALUE ENGINEERING

Value Engineering

Value engineering has the goal of lowest lifecycle costs.

Value engineering Benefits
 Value Engineering for complex projects much more beneficial than simple
projects.
 Pareto’s Law of Optimality states that 80% of the costs come from 20% of
the items therefore to achieve maximum benefit we should focus on those high-
cost areas.
 Value engineering can prove to be a
powerful tool in an increasingly-
competitive world market that every
dollar spent on value engineering, a
return of from three to four dollars
can be expected from this activity.

PROJECT MANAGEMENT
VALUE ENGINEERING

Factors causing poor value

1. Poor attitudes
2. Poor habits
3. Poor ideas
4. Poor information
5. Time constraints
6. Temporary circumstances
7. Mistaken beliefs

PROJECT MANAGEMENT
VALUE ENGINEERING

Value Types

Cost Value Exchange Value Use Value Esteem Value

Refers to the totality of Refers to the Refers to the Refers to the

labor, material, equipment characteristics of the characteristics of characteristics of
, and overhead costs, project, product, or the project, the project,
involved in actually service which allow it product, or service product, or
producing and bringing to be traded for which enable it service which
to market the project, something of to accomplish make
product, or service. value, such as its intended ownership
currency. purpose. attractive.

PROJECT MANAGEMENT
 VALUE ENGINEERING
Level of Influence Curve

Early application of value
engineering techniques in the
design phase makes the most
sense.

VE application during the

construction process can be
problematic.

Engineering/design – High
influence on costs with low
expenditure

Procure/construct – Low
influence with high expenditure

PROJECT MANAGEMENT
VALUE ENGINEERING
Project Schedule

Optimum project duration results in the lowest life cycle cost

PROJECT MANAGEMENT
VALUE ENGINEERING
Functional Analysis Systems Technique (FAST)/Functional Approach

Identify unnecessary costs

Use an active verb and measurable noun

Identify primary functions and secondary functions

Use “Why” and “How” to stimulate thinking
Value Engineering study team

Diversified team members

Variety of relevant specializations

PROJECT MANAGEMENT
 VALUE ENGINEERING
Value Engineering job plan

1 Information Phase

2 Speculation Phase

3 Analysis Phase

4 Development Phase

5 Basic design

1. Follow-up and
6 Implementation Phase

PROJECT MANAGEMENT
VALUE ENGINEERING

PROJECT MANAGEMENT
VALUE ENGINEERING
Value Engineering success steps
1. An organized creative approach to cost reduction
2. Target fonctions versus technique
3. Targets areas of unneeded costs
4. Enhance the value of the product or service
5. Same level, or improved performance level, at reduced cost
6. Does not harm quality or reliability

PROJECT MANAGEMENT
CONTRACTING FOR CAPITAL PROJECTS
Contract

A contract is a mutually binding legal agreement that obligates the seller to provide
the specified products, services, or results, and obligates the owner to
compensate the contractor.

A contract is a legal relationship subject to remedy in the courts.

The difference between a contract and an agreement is the element of legal
enforceability.

PROJECT MANAGEMENT
CONTRACTING FOR CAPITAL PROJECTS
Requirements of a Contract

1. An offer

2. Acceptance

3. Consideration (Something of value, not necessarily money) to warrant performing the work

4. Legal capacity (Separate legal parties, competent parties) Legal and mental capacity

5. Legal purpose (You cannot have a contract for the sale of illegal goods or services)

PROJECT MANAGEMENT
CONTRACTING FOR CAPITAL PROJECTS
Parties to a Contract

There must be a minimum of two parties in a contractual arrangement.

1. Owner (the first party)

2. Contractor (the second party)

3. Related parties

4. Third parties

PROJECT MANAGEMENT
CONTRACTING FOR CAPITAL PROJECTS
Mistakes that Make Contracts Defective

Nature of the transaction the property is not zoned for such
a facility

Identity of a party

Identity of the subject matter location at which Facility A
cannot be constructed

Existence of the subject matter facility is destroyed by fire

Mistakes that Do Not Make Contracts Defective

Value, quality or price

Terms of the contract
Other Factors Affecting Enforceability of Contracts

Statutory or regulatory provisions

Valid contractor’s license

Valid professional engineering or land survey
registration
PROJECT MANAGEMENT
CONTRACTING FOR CAPITAL PROJECTS
Contents of a Contract

Invitation to Bid or Request for Proposal

Instructions to Bidders

Addenda Issued During the Bid Period Bid or Proposal

Contract

Bonds

General Conditions

Special or Supplemental Conditions

Scope of work (Technical Requirements of the Contract)
 It define what work is to be accomplished by which party, when, and to what
level of quality.
 Disagreement over what in/out scope is one of causes of disputes.

Change orders or contract modifications

Permits, environmental agreements, geotechnical reports, technical requirements

PROJECT MANAGEMENT
CONTRACTING FOR CAPITAL PROJECTS

Types of Contract

Contract

Guaranteed Maximum
Price [GMP] contracts

Fixed Price– Fixed Price - Cost Target

Lump Sum Unit Price Reimbursable Contracts

Fixed Price Indirect Costs

Fixed Price
With Economic Direct Costs (Overhead Mark Up Costs
With Incentives
Adjustment Costs)

Types of Costs

PROJECT MANAGEMENT
CONTRACTING FOR CAPITAL PROJECTS

Advantages Disadvantages

Fixed-Price/  Final Cost are known and the  Changes are difficult and costly
selection of contractor is fairly  Contractor chooses cheapest solutions
Lump-Sum easy  Bidding time and design time make early
Contracts  Lowest risk and minima start not possible
supervision (mostly quality /  Contractor include high contingencies in
schedule) price
 Contractor quickly solve his
problem

Fixed-Price/  Flexibility (scope and quantity  Final cost is not known since BOQ
can be varied). estimated on incomplete engineering.
Unit Price  Good design definition is not  Staff needed to measure, control, and
Contracts essential. typical drawings are ok report on the cost / status of the work.
 Very suitable for competitive  Biased bidding and front end loading
bidding may not be detected.

PROJECT MANAGEMENT
CONTRACTING FOR CAPITAL PROJECTS

Advantages Disadvantages

Cost  Early start can be made.  Final cost is unknown.

 Flexibility in dealing with  Difficulties in evaluating proposals.
Reimbursable
changes.  Contractor has little incentive for early
Contract  Owner control all work completion or cost economy.
aspects.  Contractor may assign its “second
division” personnel to the job.
 Owner carries most of the risks and faces
the difficult decisions

Target  Early start can be made.  Final cost initially unknown

 Flexibility in dealing with  No opportunity to competitively bid the
Contract
changes. targets.
 encourages economic and  Variations are difficult and costly once the
speedy completion target has been established

PROJECT MANAGEMENT
CONTRACTING FOR CAPITAL PROJECTS

PROJECT MANAGEMENT
CONTRACTING FOR CAPITAL PROJECTS

PROJECT MANAGEMENT
CONTRACTING FOR CAPITAL PROJECTS
Project Delivery Method
1. Design-Bid-Build

 Project is fully designed before contractor is employed.

 Owners who employ fixed price contract that choose this type to know the
cost before construction.
2. Design-Build

 Engineering-Procurement-Construction contract (EPC), fast track, flash track,

or turnkey methods.
 Construction can start prior to the completion of the design.
PROJECT MANAGEMENT
CONTRACTING FOR CAPITAL PROJECTS
3. Indefinite Quantity Contract

 Task Order Contracting, or Job Order Contracting.

 Utilized on repetitive work such as routine repair and maintenance projects.
 Owner and contractor establish set prices for labor, equipment, markups, etc.
 As a result, scope does not need to be fully known prior to commencing
work.

PROJECT MANAGEMENT
CONTRACTING FOR CAPITAL PROJECTS
Contracting Arrangements
1. Single Prime Contractor Organization
 Design-bid-build.
 Owner contracts with a design
professional.
 Owner contracts with a single
contractor ASA design complete.
 limited extent from claims or disputes
arising from vendors, suppliers, and
subcontractors.
2. Multiple Prime Contractor Organization

 Series of contracts to several

contractors.
 Construction is more quickly.
 Coordination Risk.
 Conflicts, delays or
coordination problems.
Consequently, claims to the
owner.

PROJECT MANAGEMENT
CONTRACTING FOR CAPITAL PROJECTS
3. Design Build Organization
 Shorten delivery time
 Single point of responsibility for both design and
project execution.
 A variation of the typical Design-Build Contract
is a Turnkey Contract

4. Agency Construction Management Organization

 Project management or program

management contracting.
 Owner contracts directly with designer
and contractor.
 Owner retains independent construction
manager (Coordination and overseeing
the activities)
 Construction manager has limited
authorities.

PROJECT MANAGEMENT
CONTRACTING FOR CAPITAL PROJECTS
5. Construction At-Risk Organization

 Employs construction
manager, project
manager or program
manager in lieu of a
general contractor.
 All trade contracts are
issued by the
construction manager.
 The construction
manager executes a
contract with a firm
fixed price―lump sum

PROJECT MANAGEMENT
CONTRACTING FOR CAPITAL PROJECTS
Contractor Prequalification

Owners may find themselves in a position of having to prequalify contractors.

Prequalified bidders can be assured that they are bidding against relatively equal competitors
understand the work and will estimate rationally.

An owner benefits as there is some degree of assurance that all contractors submitting bids
are qualified and capable of successfully performing.

If an owner chooses to prequalify contractors, an objective, rational system must be
established―such that all potential bidders can easily determine whether they are, in fact,
qualified.

Such objective measures may include the following:
 Past experience on projects of similar size, complexity, technical and schedule
requirements.
 Past experience with the design build team proposed on this project.
 Current financial capability.
 Safety ratings on past projects.
 Experienced project team, etc.

PROJECT MANAGEMENT
CONTRACTING FOR CAPITAL PROJECTS
Decision to Bid
1. Expertise
 No similar projects and spread risk.
2. Financial Capability
 Insurance or bonding requirements, Payment provisions.
3. Bonding Capacity
 Performance or payment bond and bonding capacity.
4. Personnel
 Owner staff has sufficient experienced personnel to perform the work.
5. Equipment
 If a project requires specialized equipment to perform the work.
6. Specialized Knowledge
 Owner has requisite skills and knowledge to successfully perform the work.
7. Risk Analysis
 Determine how project risk is allocated under the contract.
8. Workload and Other Potential Projects
 Impact equipment, key personnel, logistics, bonding and financial capabilities.

PROJECT MANAGEMENT
 CONTRACTING FOR CAPITAL PROJECTS
Key Contract Clauses
1. Audit 12. Limitation of Liability
2. Changes 13. No Damages for Delay
3. Contractor Responsibilities 14. Order of Precedence
4. Delays 15. Owner Responsibilities
5. Differing Site/Changed Conditions 16. Payments
6. Dispute Resolution 17. Quantity Variations
7. Force Majeure 18. Schedules
8. Governing Law 19. Suspension of Work
9. Indemnification 20. Termination
10. Insurance 21. Time of the Essence/Time of Performance
11. Late Completion Damages 22. Warranty

PROJECT MANAGEMENT
CONTRACTING FOR CAPITAL PROJECTS

PROJECT MANAGEMENT
CONTRACTING FOR CAPITAL PROJECTS

PROJECT MANAGEMENT
STRATEGIC ASSET MANAGEMENT

Total Cost Management Framework
 The sum of the practices and processes that an enterprise uses to manage the
total life cycle cost investment in its portfolio of strategic assets.
 The practices are called Cost Engineering and the process through which the
practices are applied is called Total Cost Management (TCM).
 Asset Management sub-process of Total Cost Management (TCM).

Strategic Asset
 Any physical or intellectual property that is of long term or ongoing value to an
enterprise.
 Strategic assets may vary from industrial plants to transportation systems to
software programs; essentially anything that an enterprise makes significant
investments in can be considered a strategic asset.
 Each asset has a life cycle. For example, a building owner evaluates designs, builds, leases,
maintains, renovates, and eventually demolishes a building during its life cycle―at each stage
of the building’s life the owner makes cost investments in it that must be managed.

PROJECT MANAGEMENT
STRATEGIC ASSET MANAGEMENT

 In the building example, Strategic Asset Management is the process where

the building owner measures the building’s operating performance, assesses
improvement ideas, and conceives, evaluates, and initiates building investment
projects.
 The Strategic Asset Management and Project Control sub-processes are
linked in TCM.

Project System
 The bridge or link between the owner’s Strategic Asset Management and
Project Control processes.
 It is a subset of the Strategic Asset Management process that includes the
steps for planning asset investments, implementing investment decisions, and
then measuring project system and asset performance.

PROJECT MANAGEMENT
STRATEGIC ASSET MANAGEMENT

Levels of Goals/Plans and their Importance

PROJECT MANAGEMENT
STRATEGIC ASSET MANAGEMENT

The Total Cost Management Process

PROJECT MANAGEMENT
STRATEGIC ASSET MANAGEMENT

The Strategic Asset Management Process

PROJECT MANAGEMENT
STRATEGIC ASSET MANAGEMENT

PROJECT MANAGEMENT
STRATEGIC ASSET MANAGEMENT

The asset owner performs the following steps for each asset in their portfolio, and for
their project system.
1. Performance Measurement
 Measurements (e.g., safety, cost, operability, etc.) are taken of how well existing
assets and the project system is performing.
2. Performance Assessment
 Performance measurements of assets and the project system are compared to
strategic plans.
3. Planning
 Considering the enterprise’s objectives and requirements, asset portfolio and
project system improvement ideas are conceptualized, evaluated, and converted
into plans for investing resources in new or improved assets or project systems.
4. Implementation
 Investment plans and requirements are communicated to and executed by project
teams.
PROJECT MANAGEMENT
STRATEGIC ASSET MANAGEMENT
Asset and Project System Performance Measurement
1. Asset performance measurement
 Safety
 Cost
 Quality
 Operational efficiency
 Resource consumption (e.g., materials, labor, energy, etc.)
2. Project system performance measurement
 Safety
 Cost
 Quality
 Schedule

PROJECT MANAGEMENT
STRATEGIC ASSET MANAGEMENT
Asset Planning

Owner identifies asset investment and Project System options, defines and evaluates
them, and decides upon which options to move.
 Investment options identification step, finds ways to improve asset or Project
System performance.
Implementation

Based upon the decision process to implement an asset or Project System
improvement idea
 Planning focus on developing the technical scope and execution plans
 Formal documentation inclusive of budget and operating cost should be added to
the capital budget
 During implementation, the asset is reviewed continually on its technical scope
and execution plan
 Project definition is also known as the front-end loading (FEL) phase
 With good FEL, late changes in scope are minimal
 At completion of FEL, project has a detailed budget and schedule that serve as
the basis for
 project control during execution
PROJECT MANAGEMENT
STRATEGIC ASSET MANAGEMENT
Application - Capital or Fixed Assets

Includes items such as manufacturing plants and equipment, buildings, roads,
utilities, and similar items that are not easily moved and have significant-useful
lifespans
 Generally created, modified and retired through a project process
 List of opportunities and challenges identified by strategic planning is long

 Review improving technology against plans, basis and

assumptions
 Process application is reviewed against estimating,
historical data, schedule, risk, value engineering and
then results in the decision analysis
 Documentation and decision analysis are key to the
process

PROJECT MANAGEMENT
STRATEGIC ASSET MANAGEMENT
Application - Product

Include such as items as manufactured goods and similar items that have a
limited useful lifespan
 Products are created through an ongoing, discrete or continuous manufacturing
or production process, rather than a project process
 Teams should develop a flow chart of business operations that reviews flow of all
backgrounds
 Process for products is similar to capital planning
Application—Software

Difficult to classify software as either a capital asset or product
 May or may not have a limited-useful lifespan
 May not be fixed depending on installation in a particular device
 Software estimates deal with configuration and coding activities versus
construction or actual assemblies

PROJECT MANAGEMENT
CHANGE MANAGEMENT PRACTICAL GUIDE

Change Management Overview

Projects have always involved change. However, they tend to have varying
degrees of change management approaches.

Change management is the process for identifying, resolving, reporting, and
administering changes to a project that affects its scope, cost, or schedule.

Change management and control has proven to be an essential part of controlling a
project and is critical to the project team’s ability to successfully manage the work
effort.

The change management methods, if appropriately applied, will more clearly identify
project change the degree of change impact on risk, and the potential
consequences.

Successful application of these methods will save money and minimize the
effects of negative events identified through the change management process.

PROJECT MANAGEMENT
CHANGE MANAGEMENT PRACTICAL GUIDE

TCM Process Map for Change Management

PROJECT MANAGEMENT
CHANGE MANAGEMENT PRACTICAL GUIDE

Project Change Management Procedure Sample “30

days from notice to proceed”

PROJECT MANAGEMENT
CHANGE MANAGEMENT PRACTICAL GUIDE

Change Management Flow Chart – Contractor’s Perspective

PROJECT MANAGEMENT
 CHANGE MANAGEMENT PRACTICAL GUIDE
Project Variance Notice (PVN)/Change Request

The form is a summary level document and should be supplemented with any
additional information needed to understand and justify the variance.
1. Section 1: “Title”
2. Section 2: “Change Information” Assign a sequential number to the PVN, log it into
the change register.
3. Section 3: “Approvals”
4. Section 4: ”Distribution” The PCM/CCM, or project controls person, will check
the appropriate blocks and arrange for distribution.
PVN Review Meeting

The contractor project manager will conduct periodic PVN review meetings to keep
the project team fully informed of the status of each new and pending variance.
1. Periodic Internal Review, weekly
2. Special Internal Review, impact which cannot wait for the periodic meeting.
Microsoft Office
3. Client Review. Word 97 - 2003 Document

PROJECT MANAGEMENT
CHANGE MANAGEMENT PRACTICAL GUIDE
Client Change Procedure

1. Change Request

i. Any variance is to be processed into a PVN and change request.

ii. 3 working days approval.

iii. The contractor will prepare an order of magnitude analysis.

iv. The client will have a reasonable period to approve or reject any change
request.

v. The client may respond as follows:

a) Reject the proposed change request
b) Approve the proposed change request immediately as a
change order.
c) Direct that a more detailed analysis of the change be
made and that it be resubmitted as a change proposal.

PROJECT MANAGEMENT
CHANGE MANAGEMENT PRACTICAL GUIDE
2. Change Proposal
i. Upon request by the client, the contractor will prepare a change proposal.
ii. The client shall bear the cost of preparing any change proposal.
iii. The client shall have a reasonable period of time to approve or reject any change
proposal.
iv. The client may respond as follows:
a) Reject the change proposal.
b) Approve the change proposal as a change order.
Change Order

Approved change request or a change proposal – by client.

Officially and Written.

PROJECT MANAGEMENT
CHANGE MANAGEMENT PRACTICAL GUIDE
Contractor Internal Change Procedure

This procedure is not dependent upon contract type, and should be followed for all
projects:
1. Project Manager’s Evaluation
2. Reject the PVN
3. Approve the PVN
Disputed Change

For any change, the contractor project manager must perform the following:
1. Consult with the contract and legal departments.
2. Explicitly follow the contractual change procedure and associated change
management protocols.
3. Dispute the change in writing.
4. Receive written instruction from the client defining the course of action.
5. Maintain separate and complete records of the time spent

PROJECT MANAGEMENT
CHANGE MANAGEMENT PRACTICAL GUIDE
Change Register

The contractor will maintain a change register containing all PVNs, change requests.

Logs will include the PVN number, the change request, change proposal

The contractor will issue the change register to the client as specified in the contract.
Pending Change Order

Each pending change order is to be maintained in a change log.

The cost of the pending change must be considered in the forecast.

The detailed cost distribution for the change should be tracked separately.

When approved by the client, the current budget and revenue is to be updated.
Change Order Identification

Identify each change order consecutively, using a three character numeric block.

Note that more than one variance may be included in a single change order.

If there is a client change order numbering convention, it should be cross referenced
to the contractor character number system.

PROJECT MANAGEMENT
OVERVIEW OF CONSTRUCTION CLAIMS AND DISPUTES
Changes/Variations

A frequent occurrence on virtually all contracts is change/variation.

It is incumbent upon both the owner/employer and the contractor to establish formal
systems to identify changes/variations as soon as they arise and to estimate and
negotiate the full scope, time, cost, and impact of the change/variation as quickly as
possible.

All such elements of changes/variations should be dealt with as promptly as possible
in order to avoid later disputes.

PROJECT MANAGEMENT
OVERVIEW OF CONSTRUCTION CLAIMS AND DISPUTES
Contract Claims

Frequently, disagreements over contract requirements arise, which cannot be
resolved through the change/variation order process.

Typically, such disputes are referred to under the rubric of a claim.

Many design and construction contracts have clauses that address disputes or claims
and the notices required in order to properly assert a dispute or claim.

Claims, like changes/variations, should be addressed promptly and resolved in
accordance with the terms of the contract.

PROJECT MANAGEMENT
OVERVIEW OF CONSTRUCTION CLAIMS AND DISPUTES

Claim Change/Variation Order

A written demand or assertion by one of A directive from the owner/employer, or
the contracting parties seeking, as a matter their representative, to the contractor
of legal right, payment of additional money, directing him or her to perform work
adjustment to the time of performance differently or perform different work than
and/or some other change/variation to the contracted.
terms of the contract, arising under or
related to the contract.
“Requests for additional time and/or
money”

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OVERVIEW OF CONSTRUCTION CLAIMS AND DISPUTES

Universe of Claims

There are only 11 types of claims in most contracts ….. As per causes!
1. Owner/Employer Directed Changes/Variations
2. Constructive Changes/Variations
3. Differing Site Conditions/Unforeseeable Site Conditions
4. Directed Suspension of Work
5. Constructive Suspension of Work
6. Force Majeure
7. Delay
8. Directed Acceleration
9. Constructive Acceleration
10. Termination for Convenience
11. Termination for Default

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OVERVIEW OF CONSTRUCTION CLAIMS AND DISPUTES

Directed  Resulting from owner/employer directed change/variation.

Changes  Involving a dispute over the time, cost and/or impact. Bilaterally or Unilaterally

 Resulting from owner unintended change that requires the contractor to

do more than is required by the contract.
Constructive
 Results in additional cost or time being incurred.
Changes
 Comments on shop drawing submittals or Ambiguous contract
requirements.

 Encounters with latent (hidden) physical conditions at the site differing

materially from the conditions indicated in the contract documents.
a) Type 1: Latent (hidden) physical conditions at the site is different (Rock,

Differing Site subsurface water, and Buried pipes).

Conditions b) Type 2: Unknown physical conditions at the site (Archaeological or
paleontological finds).
c) Type 3: Material unexpected encounters with hazardous or toxic
materials (Presence of waste oil deposit).

PROJECT MANAGEMENT
OVERVIEW OF CONSTRUCTION CLAIMS AND DISPUTES
 An owner directive to stop some or all of the work of the project for a
Directed
limited period of time.
Suspension of
 The contractor is performing the work in an obviously unsafe manner,
Work
otherwise the contractor can claim.
Constructive  Accidental or unintended work stoppage caused by owner.
Suspension of  Delayed approval of shop drawings or issuance of changes/variations or
Work delivery of owner/employer furnished items.
 Unforeseeable events caused by third parties or acts of God. Beyond the

Force Majeure control of both parties.

 Fires, Floods. Earthquakes, Tsunamis or Acts of war or terrorism

 An impact to the contractually specified completion date or the adjusted
contract completion date (7 types of delay on projects).
 Most contracts deal with the following 4 types of delays.
Delay
a) Excusable, Non-Compensable Delay (Third party/FM), No Cost & NO LD’s
b) Excusable, Compensable Delay (Owner), time extension ok.

c) Inexcusable Delay (Contractor), Make up be him or LD’s

d) Concurrent Delay
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OVERVIEW OF CONSTRUCTION CLAIMS AND DISPUTES
Concurrent Delay / Overlapping delay

Case A: Contractor Delay

Time Extension only
Employer Delay due delays out of
Others parties control

Case B: Contractor Delay

Time Extension & Cost
Employer Delay & NO LD’s
Others

Case C: Contractor Delay

NO Time extension &
Employer Delay
LD’s
Others

Case D: Contractor Delay

Time Extension & Cost
Employer Delay For Employer’s delays
Others portion only
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OVERVIEW OF CONSTRUCTION CLAIMS AND DISPUTES
Directed  Owner direct the contractor to complete earlier in order to maintain a
Acceleration completion date despite an acknowledged delay. Voluntary acceleration

Constructive  Inadvertent owner action or failure to act, which results in a contractor

Acceleration being required to complete earlier than required.

Termination for
 Owner action to end work in whole or in part.
Convenience

Termination for
 End work due to a material breach of the contract.
Default

Claims Categorize
Extra- Contractual
Contractual Claims Ex gratia Claims
Claims
Have a basis in the These claims have no Ex gratia (“Out of Kindness”)
contract itself where basis in the contract but claims are those where a
provision can be quoted entitlement stems from contractor is seeking something
giving rise to entitlement the governing law more tangible than sympathy.

PROJECT MANAGEMENT
OVERVIEW OF CONSTRUCTION CLAIMS AND DISPUTES
Owner/Employer Claims; 3 types of claims
 The owner/employer has the right to assess and collect damages for late
completion of the work caused solely by the contractor without any
Late owner/employer involvement.
Completion a) Actual Damages: The owner/employer as the claimant would have to
Damages keep careful track of all actual damages where incurred. Mutually waive.
b) Liquidated Damages: Stipulated amounts, usually on a daily basis,
agreed to at the time the contract is executed. Not need to be proven.
False or  If a claim can be proven to be false or fraudulent as defined in various
Fraudulent statutes, recovery may include restitution, civil penalties, costs, punitive
Claims damages and attorney’s fees.
Design  The basis for many contractor claims against owners/employers lies in the
Deficiency or deficient performance of the Architect/Engineer (A/E).
Standard of  In turn, some owners/employers seek recovery from the A/E for the
Care Claims damages the contractor may recover from the owner/employer.
 Sometimes called Special Damages, are damages that arise as a result
Consequential
of the failure of the owner/employer or the contractor to live up to their
Damages
obligations under the contract.

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 OVERVIEW OF CONSTRUCTION CLAIMS AND DISPUTES
Burden of Proof

The basic equation of a successful claim is summarized as follows:
1. Notice
 Formal, or sometimes informal (e.g. constructive notice)
 Communication from one party that potentially will be seeking time and/or cost
relief for an issue that has arisen.
2. Liability/Entitlement
 An event or circumstance has occurred during project performance such as a
change/variation, delay or differing site condition.
3. Causation
 The event or circumstance such as some portion of the work is revised and
performed differently than originally planned and work has to be re-sequenced as
a result.
4. Damages /Quantum
 The work costs more and/or takes longer than planned.
PROJECT MANAGEMENT
OVERVIEW OF CONSTRUCTION CLAIMS AND DISPUTES
Damages
1. Direct Costs
2. Indirect Costs
a. Field office overhead
b. Home office overhead
3. Delay Costs
4. Impact Costs
5. Other Contractor Damages
6. Other Owner/Employer Damages

PROJECT MANAGEMENT
OVERVIEW OF CONSTRUCTION CLAIMS AND DISPUTES
Claims and Project Delivery Methods
1. Unit Price, change in the number of units installed

2. Design-Bid-Build improper design, lumpsum

3. Design-Build, ambiguities in contract language

4. Fast Tack Construction, coordinate the interfaces between the multiple contracts

5. Multiple Prime Construction, multiple lots, coordination

6. Construction Management at Risk (CM@R)

7. Alliance Contracting/Integrated Project Delivery (IPD)
8. Public Private Partnership (P3)

PROJECT MANAGEMENT
 OVERVIEW OF CONSTRUCTION CLAIMS AND DISPUTES
Analysis of a claim

1 2 3 4

Entitlement
Damage Settlement
and Causation Delay Analysis
Analysis Negotiations
Analysis

Identify issues, evaluate Baseline and updated Complete the analysis,

Determine costs
all relevant contract schedules, compare negotiate settlement
and calculate
language, establish issue as-planned, updates with the other party,
damages
files, analyze issues, and as-built, use an independent
determine potential for determine delays, mediator or third-
contractual entitlement, associate claim issues, party-neutral.
magnitude, and request perform a detailed
additional information. analysis, and Identify
the party responsible
for the delay(s).
PROJECT MANAGEMENT
OVERVIEW OF CONSTRUCTION CLAIMS AND DISPUTES
Dispute Resolution

Negotiation Mediation Arbitration

Alternative
Litigation Dispute
Resolution

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OVERVIEW OF CONSTRUCTION CLAIMS AND DISPUTES
1. Negotiation
 Between project teams or elevated in both the owner’s and the contractor’s
organizations.
 The concept is to discuss the disputed issue face-to face and mutually arrive at
an acceptable solution.
2. Mediation
 A structured negotiation between the parties utilizing the services of an outside,
voluntary, neutral facilitator (the mediator).
 The mediator’s only power is the power of persuasion.
3. Arbitration:
 More formalized procedure by an outside organization operating under a
national/international set of rules.
 There may be a single arbitrator or a panel appointed by one of these
organizations.
 Arbitrator’s ruling is enforceable at law in a court of competent jurisdiction.
PROJECT MANAGEMENT
OVERVIEW OF CONSTRUCTION CLAIMS AND DISPUTES
4. Litigation:
 A formal lawsuit in federal court according to contract terms and under the rules
of the jurisdiction.
 Lawsuits are time consuming, lengthy, and very expensive.
 The outcome may rest more on legal technicalities than on fact or circumstance.
 A party submitting a dispute to litigation retains no control over process or
outcome.
5. Alternative Dispute Resolution
 There are numerous other forms of Alternative Dispute Resolution (ADR)
available to the parties involved in a dispute,
 Many are voluntary and need not be mandated by contract.

PROJECT MANAGEMENT
OVERVIEW OF CONSTRUCTION CLAIMS AND DISPUTES

Dispute Resolution Staircase

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ECONOMIC ANALYSIS, STATISTICS, PROBABILITY AND RISK

1. Financial & Cash Flow Analysis

2. Practical Corporate Investment Decision-Making Guide

3. Statistics & Probability

4. Optimization

5. Risk Management Fundamentals

6. Risk Management Practical Guide

7. Total Cost Management Overview

8. The International System of Units (SI)

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THANK YOU

PROJECT MANAGEMENT